The Fair Trade Music (FTM) initiative is governed by Fair Trade Music International (FTMI), an independent, not-for-profit organization overseen by music creators from five continents. We regard the criteria below as the reasonable minimum standard for any music release to be considered compliant with the Fair Trade Music certification.
As the music industry continues to be on the front line of technology, it is understood that our criteria will be reviewed and revised on a regular basis. Likewise, we acknowledge that such changes also mean that compliance will be an evolving journey. Nevertheless, we will strive to ensure that any changes to the release criteria are made with advance notice that gives all qualified applicants sufficient time to adapt.
How the Criteria Were Developed
Over the course of several months in the Spring of 2016, a group representing a wide variety of music viewpoints met to determine the criteria necessary for Fair Trade Music. This group included recording artists, songwriters, composers, copyright and entertainment attorneys, music publishers, record labels and music accountants, among others.
The following criteria, which were agreed to and adopted by this process, pertain to certification for an individual release with only a specific album or single being certified. This certification is authorized only when the Fair Trade Music certification seal is present. At this time, an FTM Certified Release does not certify the channel, label, digital platform, store, or venue in which that music is being sold. Criteria to certify such categories are currently being developed.
Please contact us for assistance or to make sure that your project is eligible for certification. The four-steps to receiving Fair Trade Music certification are shown below.
“If the revenues don’t flow back to the creators, while the shareholders and CEOs of companies who deny the value of music enjoy literally billions in profits, something is terribly wrong.”
Certified Release Criteria
To attain the Fair Trade Music certification, any release must comply with the business practices detailed below.
Many independent releases are, and have long been, in general accord with these criteria, and we applaud these efforts to craft equitable, transparent and sustainable agreements. In many cases, these served as inspiration for the FTM release criteria outlined here:
1. Disclosure of Revenues
A record label or similar entity releasing an FTM certified release (“Applicant”) will regularly disclose through full, complete, and comprehensive accounting statements, any and all forms and levels of gross and net revenue and remuneration relating to the Certified Release, to the music creators and rights holders downstream of that revenue and remuneration. These criteria apply whether or not the Certified Release is in a recouped position.
This disclosure would include, but not be limited to the following:
- physical distributions and sales, and related revenue and remuneration;
- music service subscription, streaming and download revenue and remuneration;
- any other revenue and remuneration derived from the exploitation of the Certified Release;
- advertising revenues and remuneration related to music access; and
- music-related data mining revenue and remuneration.
2. Payment/Split of Royalties
Applicant will pay the applicable recording artist(s) no less than fifty (50) percent of net revenue derived from the Certified Release, and will pay all applicable creators and rights holders their royalties and payments due at a rate of no less than 100% of any and all statutory and industry-negotiated royalty rates, which rates shall not be subject to contractually-based deductions other than recoupment of advances (if any) rendered directly to such third parties.
3. Efficient Royalty Distribution
Applicant will efficiently, accurately and comprehensively distribute royalty earnings no less than semi-annually, and will engage best practices with respect to financial distribution methods as new and improved technologies emerge.
Applicant agrees to use, disseminate and respect the integrity of up-to-date standard identifiers (i.e. metadata in the digital realm) including the following examples where applicable: for sound recordings – ISRC, for musical works – ISWC, for authors – IPI, for publishers – IPI, and for performers – IPN.
4. Accurate Royalty Accounting
- Regularly account to the applicable creators and rights holders, and do so in a comprehensive, accurate and accessible manner. Reporting should include all costs and deductions related to the Certified Release, including without limitation recording, production, marketing, and distribution costs.
- Use best efforts to employ up-to-date technologies, real-time reporting and online portals wherever possible.
- Refrain from including contractual language specifying that failure to object to a particular accounting statement within a time period shorter than any applicable statute of limitations shall constitute a waiver of rights.
- Ensure the creator(s) is entitled to a right, upon reasonable notice, to have a certified public accountant (or applicable equivalent in a given jurisdiction) of his/her choosing and at his/her expense (unless otherwise agreed) audit the books and records of such Applicant no more frequently than once per year.
5. FTM Compliance Audits
Applicant agrees and acknowledges that Fair Trade Music International and/or its designee(s) has the right, at its own expense, upon reasonable notice, to perform a monitoring audit with respect to the Certified Release, no more frequently than once every 3 years.
6. Disclosure of Equity Stakes and Conflicts of Interest
Applicant will disclose third party and all other equity stakes connected to potential conflicts of interest to all applicable creators and rights holders, and will engage in fair sharing of all revenue and remuneration derived from such equity stakes and similar compensatory arrangements.
7. Ancillary Provision Terms and Maximums
Applicant must demonstrate that if Certified Release is subject to a so-called “360 Deal,” the terms of such agreement comply with the following:
- There shall be no cross-collateralization among or between income derived from different representation categories (i.e., master rights, publishing, merchandising, touring, etc.);
- All such representation categories shall be no longer than the master rights period, which master rights shall be subject to reasonable rights of reversion/termination and standard re-record provisions; and
- Maximum thresholds of Applicant remuneration shall be fair subject to industry norms.
Frequently Asked Questions
What is the certification process?
FTM currently certifies releases of singles and albums via the four steps shown above. An Applicant (label, independent artist) contacts FTMI to assess whether their project may be eligible for certification. If so, FTMI sends an application package consisting of the certification criteria and an agreement between the applicant and FTM. The applicant then submits: (a) the FTM agreement, signed by the Applicant, (b) a US$25 fee, and (c) a copy of their complete, executed artist contract. All documents are then reviewed by a third-party accounting professional in strict confidence. If the submission conforms with FTM Certification Criteria, the Applicant is licensed to use the FTM Seal on the applicable release(s). FTMI reserves the right to confirm continued compliance (including through Monitoring Audits) for as long as the Applicant uses the FTM seal.
Will an applicant’s record deal or monitoring audits be made public?
No. FTMI adheres to strict non-disclosure agreements with all of its applicants. The only information that FTM may make public about an Applicant is that it has attained the Fair Trade Music certification.
Who pays for the monitoring audits?
FTMI pays for the monitoring audits.
Who pays for the Fair Trade Music certification sticker or seal?
Once certified, the accepted applicant pays costs associated with applying the FTM Seal.
Will users of the seal see a boost in sales?
Studies have shown that a buyer is 15% more likely to buy the item with the “Fair Trade” seal – even if that item is more expensive.
Is FTMI affiliated with other fair trade organizations?
No. FTMI is an independent not-for-profit organization overseen by music creators, but we continue to communicate with and draw inspiration from the work of other fair trade organizations.